ASIC cancels AFSL over super switching scheme
A Melbourne firm has had its Australian financial services licence and Australian credit licence cancelled after the Federal Court found that it had breached numerous financial services laws.
ASIC has cancelled the AFSL and ACL of Financial Circle Pty Ltd after it was found to have breached numerous financial services laws and obligations, including engaging in unconscionable conduct and failing to act in its clients’ best interests.
The Federal Court made interim orders in January this year restraining Financial Circle from providing advice or entering into credit contracts following an investigation by ASIC.
The ASIC investigation found that Financial Circle offered personal loans to consumers of up to $5,000 that could only be obtained if the consumer agreed to receive and implement financial advice.
“The advice typically recommended purchasing personal insurance products and switching superannuation providers,” ASIC said in a previous statement.
“When consumers implemented the advice, significant advice fees were paid to Financial Circle directly from the consumers’ superannuation. Financial Circle also received ongoing commission payments from the insurers.”
This process often resulted in a substantial erosion of clients’ superannuation balances, in many cases up to 30 per cent, according to ASIC.
In late October, the Federal Court ordered Financial Circle to pay $8,980,000 million for multiple breaches of obligations and consumer protection laws and was also ordered to pay ASIC’s costs.
In addition to ordering that the company pay pecuniary penalties, the Federal Court ordered that it be permanently restrained from carrying on a financial services business and providing credit or entering into a credit contract as a credit provider.
Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
